When may a South Carolina beer or wine wholesaler replace a retailer's damaged or outdated inventory without giving prohibited free product?

Plain-English summary

South Carolina generally prohibited beer and wine wholesalers from giving free product to retail permit holders. This 2010 ruling drew a narrow line between a prohibited gift and a permissible replacement.

A wholesaler could replace beer or wine with like product when the product was damaged before or during delivery, or when the retailer's product was damaged by the wholesaler's employee. Beer wholesalers also could replace beer that was out of date or about to expire after collecting it.

The wholesaler could not replace product damaged after delivery by the retailer, the retailer's employee, or a customer; frozen in the retailer's boxes; damaged by fire at the retailer's premises; or replaced with a product that did not meet the ruling's "like product" definition.

What this means for you

Beer and wine wholesalers

Document when and how the damage occurred. The permission turned on the loss happening before or during delivery or being caused by the wholesaler's employee. A retailer-side accident after delivery did not qualify.

Retail permit holders

Do not treat ordinary inventory loss as replaceable stock. Breakage by staff or customers, freezing after delivery, and fire damage at the premises were specifically listed as prohibited replacement situations.

Seasonal beer retailers

For beer that would expire before a seasonal location reopened, the wholesaler could collect it and issue a credit for like product—not cash—then deliver the product when the location reopened. The credit could become cash only if the permit was surrendered or not renewed because the location permanently closed.

Alcohol-licensing professionals

The ruling adopted and expanded former ABC Ruling 91-15. Because the guidance dates to 2010 and expressly remains operative only until modified, confirm current statutes and Department policy before advising on a replacement.

Common questions

Q: Can a wholesaler replace wine or beer broken by a store employee?
A: No. The ruling prohibited replacement for breakage caused after delivery by the retailer, its employee, or its customer.

Q: What if the wholesaler's employee caused the damage?
A: Replacement with like product was allowed.

Q: Could outdated wine be replaced under this ruling?
A: The special out-of-date replacement rule applied to beer only. Wine replacement was limited to the general permitted-damage situations.

Q: What counts as "like product"?
A: The same manufacturer, brand or beverage style, volume, and container type. A similar non-identical product could substitute only if the identical product was discontinued or no longer commercially available to the wholesaler.

Citations and references

• S.C. Code § 61-4-735(B)-(C) (wine wholesaler and retailer restrictions)
• S.C. Code § 61-4-940(B)-(C) (beer wholesaler and retailer restrictions)
• Former SC ABC Ruling 91-15 (beer breakage and outdated-stock policy adopted here)
• SC Information Letter 93-11 (continued treatment of former ABC Commission rulings)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR10-3.pdf

Original ruling text

State of South Carolina
Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Website Address: www.sctax.org

SC REVENUE RULING #10-3

SUBJECT:

Replacement of Beer or Wine after Delivery by a Licensed
Wholesaler
(Alcoholic Beverage Licensing)

EFFECTIVE DATE:

All periods open under the statute

SUPERSEDES:

All previous advisory opinions and any oral directives in
conflict herewith.

REFERENCES:

S.C. Code Ann. Section 61-4-735 (2009)
S.C. Code Ann. Section 61-4-940 (2009)
SC ABC Ruling 91-15
SC Information Letter #93-11

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or a
general category of taxpayers. It is the Department’s position
until superseded or modified by a change in statute, regulation,
court decision, or another Departmental advisory opinion.

INTRODUCTION
Title 61 of the South Carolina Code prohibits a licensed wholesaler from giving free beer
or wine to a licensed retailer. A question has arisen under what circumstances a
wholesaler is allowed to replace stock after delivery to a retailer. The following
guidelines are adopted from Ruling 91-15 of the former South Carolina Alcoholic
Beverage Control (ABC) Commission and include wine and beer. 1
1

The former ABC Commission and the former South Carolina Tax Commission were reorganized to form
the South Carolina Department of Revenue in 1993. ABC Ruling 91-15, concerning replacement of
breakage and out of date beer, has continued in effect since that time. See SC Information Letter #93-11
(the Department of Revenue will follow ABC Commission rulings absent a prospective change).

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These guidelines concern regulation of beer and wine only under South Carolina law.
Taxpayers interested in breakage issues pertaining to alcoholic liquor under federal law
may refer to guidance recently published by the Alcohol and Tobacco Trade Bureau
(TTB) of the United States Treasury in the TTB Newsletter (October 16, 2009 ed.),
available at www.ttb.gov.

APPLICABLE STATUTES
Transactions between wine wholesalers and holders of retail permits are restricted under
Code Section 61-4-735(B) as follows:
Except as provided in subsection (C), a manufacturer of wine, vintner,
winery, importer, or wholesaler of wine, or a person acting on his behalf
must not furnish, give, rent, lend, or sell, directly or indirectly, to the
holder of a retailer permit any equipment, fixtures, free wine, or service.
The holder of a retail permit or a person acting on his behalf may not
accept, directly or indirectly, any equipment, fixtures, free wine, or service
referred to in this subsection from a manufacturer of wine, winery,
importer, or wholesaler of wine, except as provided in subsection (C). 2
[Emphasis added.]
Similarly, as between beer wholesalers and holders of retail permits, Code Section 61-4940(B) provides:
Except as provided in subsection (C), a manufacturer, brewer, importer, or
wholesaler of beer, or a person acting on his behalf, must not furnish, give, rent,
lend, or sell, directly or indirectly, to the holder of a retailer permit any
equipment, fixtures, free beer, or service. The holder of a retail permit, or a
person acting on his behalf, may not accept, directly or indirectly, any equipment,
fixtures, free beer, or service referred to in this subsection from a manufacturer,
brewer, importer, or wholesaler of beer, except as provided in subsection (C). 3
[Emphasis added.]
2

Code Section 61-4-735(C) does not authorize replacement of stock. It provides:

A wholesaler may furnish at no charge to the holder of a retail permit draft wine
equipment replacement parts of nominal value, including washers, gaskets, hoses, hose
connectors, clamps, and tap markers, product displays as provided under 27 Code of
Federal Regulations, Section 6.83, and point of sale advertising specialties. A wholesaler
also may furnish the following services to a retailer: cleaning wine lines, rotating stock,
affixing price tags to wine products, building wine displays, setting boxes, conduct not
more than two wine tastings in accordance with department rulings or regulations,
developing shelf schematics, stocking shelves, providing wine party wagon for temporary
use, and assist in wine resets a maximum of three times a year for any store having a
retail permit during the hours of 8:00 a.m. to 8:00 p.m. Resets are defined as being a
change in the location of the wine department within a store or a rearrangement of the
products on shelves within the store’s wine department, which involves more than one
wholesaler’s products. All wholesalers must be notified in writing of any resets being
requested by a retail store at least fourteen days prior to the reset.
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Code Section 61-4-940(C) does not authorize replacement of stock. It provides:

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PROHIBITED ACTS
By statute, wholesalers are prohibited from giving free wine or beer to retailers, and
retailers are prohibited from accepting free wine or beer from wholesalers. The
provisions above also prohibit:
 Replacement of wine or beer that was damaged after delivery to the retailer.
 Replacement of breakage that was done by the retailer, his employee or his
customer.
 Replacement of wine or beer that becomes frozen while in the retailer’s boxes.
 Replacement of wine or beer damaged by fire at the retailer’s premises.
 Replacement of wine or beer under the circumstances discussed below with any
product that does not qualify as “like product” under the definition set forth
below.

PERMISSIBLE ACTS FOR WINE OR BEER
Consistent with longstanding policy concerning beer transactions set forth in ABC Ruling
91-15, replacement of wine or beer is allowed under the following circumstances:
 If wine or beer was damaged before or during delivery, the wholesaler may replace
the wine or beer with like product.
 If wine or beer belongs to a retailer, but is damaged by an employee of a
wholesaler, the wholesaler may replace the wine or beer with like product.

PERMISSIBLE ACTS FOR BEER ONLY
The following circumstances are described in ABC Ruling 91-15 and apply to beer only:
 If beer is out of date or about to go out of date, a wholesaler, after collecting such
beer, may replace it with like product.

A wholesaler may furnish at no charge to the holder of a retail permit draft beer
equipment replacement parts of nominal value, including washers, gaskets, hoses, hose
connectors, clamps, and tap markers, party wagons for temporary use, and point of sale
advertising specialties. A wholesaler may also furnish the following services to a retailer:
cleaning draught lines, setting boxes, rotating stock, affixing price tags to beer products,
and building beer displays.

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 With respect to seasonal locations, replacement of out of date beer may be
deferred as follows. If the beer will go out of date before a seasonal location
reopens, a wholesaler may collect it and give a credit for like product, but not
cash, to the retailer. The wholesaler will honor the credit by delivering like
product when the seasonal location reopens. The credit must not be converted to
cash unless the seasonal location’s permit is either surrendered or not renewed
due to permanent closing of the location.

MEANING OF “LIKE PRODUCT”
For purposes of this advisory opinion, “like product” means a product that is the same
(identical) in terms of manufacturer, product brand name (if applicable) or style of
beverage, volume and type of container. A similar but non-identical product may be
substituted only if the identical product has been discontinued or is otherwise no longer
commercially available to the wholesaler.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
January 14
, 2010
Columbia, South Carolina

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